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Ellora Paper Mills Limited v. State of Madhya Pradesh

Arbitration and Conciliation Act, 1996 – Ss. 14 r/w. 11 & 15 – Neutrality of Arbitrators.

Section 12 has been amended by Amendment Act, 2015 based on the recommendations of the Law Commission, which specifically dealt with the issue of “neutrality of arbitrators”. To achieve the main purpose for amending the provision, namely, to provide for “neutrality of arbitrators”, sub-section (5) of Section 12 lays down that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator. In such an eventuality, i.e., when the arbitration clause is found to be foul with the amended provision, the appointment of the arbitrator would be beyond the pale of the arbitration agreement, empowering the Court to appoint such an arbitrator as may be permissible. That would be the effect of the non obstante clause contained in sub-section (5) of Section 12 and the other party cannot insist upon the appointment of the arbitrator in terms of the arbitration agreement.

Question of Law

Whether, the Stationery Purchase Committee – Arbitral Tribunal consisting of the officers of the respondent has lost the mandate, considering Section 12(5) read with Seventh Schedule of the Arbitration Act, 1996. If the answer is in the affirmative, in that case, whether a fresh arbitrator has to be appointed as per the Arbitration Act, 1996 ?

The Arbitral Tribunal – Stationery Purchase Committee consisted of officers of the respondent-State. Therefore, as per Amendment Act, 2015 – Sub-section (5) of Section 12 read with Seventh Schedule, all of them have become ineligible to become arbitrators and to continue as arbitrators.

Case Law Reference

  1. Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. Ajay Sales & Suppliers, 2021 SCC OnLine SC 730
  2. Union of India v. Pradeep Vinod Construction Company, (2020) 2 SCC 464
  3. Union of India v. Parmar Construction Company, (2019) 15 SCC 682
  4. Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755
  5. S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh, (2019) 2 SCC 488
  6. Aravali Power Co. Power Ltd. v. Era Infra Engineering, (2017) 15 SCC 32
  7. TRF Ltd. v. Energo Engineering Projects Ltd.,(2017) 8 SCC 377
  8. Indian Oil Corporation Ltd. v. Raja Transport Pvt. Ltd., (2009) 8 SCC 520
  9. ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd., (2007) 5 SCC 304
  10. Union of India v. M.P. Gupta, (2004) 10 SCC 504

Case Number : CIVIL APPEAL NO. 7697 OF 2021

Hon’ble Mr. Justice M.R. Shah has pronounced the reportable judgment of the Bench comprising His Lordship and Hon’ble Mrs. Justice B.V. Nagarathna.

For Appellant(s) Mr. Soayib Qureshi, AOR For Respondent(s) Mr. Sunny Choudhary, AOR Mr. Nachiketa Joshi, Adv. Mr. Sandeep Sharma, Adv.

Case Link : https://pdf.caselaw.in/sc/2022/01/1103/

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